Goals far off: World Bank programme leader for SA Sebastien Dessus said the 8% GDP growth needed to reach the National Development Plan goals was out of reach. Higher investment and innovation were needed. Picture: FREDDY MAVUNDA
Goals far off: World Bank programme leader for SA Sebastien Dessus said the 8% GDP growth needed to reach the National Development Plan goals was out of reach. Higher investment and innovation were needed. Picture: FREDDY MAVUNDA

The National Development Plan (NDP) may be a dream deferred without structural growth in the economy, the World Bank says.

The lender, based in Washington DC, expects SA’s growth to accelerate to 1.4% in 2018 from a previous estimate of 1.1%, but it does not expect economic growth to rise beyond 2% in the medium term.

To achieve the goals set out in the plan SA would need 8% growth, it said last week.

The NDP is a detailed blueprint of SA’s plans to eliminate poverty and reduce inequality by 2030. It has been gathering dust since 2012, but President Cyril Ramaphosa has said it will be resurrected.

World Bank released its eleventh edition of the South Africa Economic Update and lifted the country's GDP forecast to 1.4%. Marek Hanusch, Senior Economist at the World Bank spoke with Business Da...

"The NDP GDP target would need to be 8% now, which is impossible," World Bank programme leader for SA Sebastien Dessus said.

The plan calls for 5.4% growth and a 6% decrease in unemployment by 2030. But Dessus said even 5% growth was unrealistic in the near term.

"Long term, we don’t see growth going to 5%. You need higher investment, higher innovation and broader participation," he said.

In fact, Dessus said the periods in which SA reached 4% to 5% growth in the early 2000s had been cyclical.

Improved confidence

"There’s improved confidence and a political transition but we’re still dealing with low growth," he said.

"We’re still far from the goals set out in the NDP."

The Treasury estimates that just an improvement in confidence, which SA has experienced in recent months due to political developments, could add 0.5 percentage points to the GDP figure.

Marek Hanusch, a senior World Bank economist, has however said that the economy does not work on confidence; it requires investment.

According to the Absa purchasing managers index (PMI), businesses are confident about future prospects but sales orders remain below the neutral 50 mark, which divides expansion from contraction, indicating that businesses are not yet acting on the improved mood.

The Treasury, which expects 1.5% growth in 2018 and 1.8% in 2019, also anticipates that effective reforms could add two to three percentage points to GDP.

In the 2018 Budget Review, the Treasury said: "Translating the cyclical upturn and improved investor sentiment into more rapid economic growth requires government to finalise many outstanding policy and administrative reforms, particularly in sectors with high growth potential."

Telecom reforms, including the release of additional broadband spectrum, could for example increase growth by 0.6 percentage points. Lowering the barriers to entry by addressing anticompetitive practices could add 0.6 percentage points and prioritising tourism and agriculture could cause growth to rise 0.2 percentage points.

The Treasury added that addressing the skills constraints, particularly with a focus on greater access to education, could cause growth to rise above 4%.

The World Bank furthermore suggested that SA’s hopes of fulfilling any of the NDP goals, particularly reducing poverty, hinged on greater access to higher education.

Low-income families lacked easy access to credit markets and incurred relatively high costs for sending a child to a college, the bank said.

In the 2018 budget, the largest reallocation of resources to the government’s priorities was made to higher education and training.

Higher education is expected to receive R57bn in additional funding over the medium term to fund free education.

Due to interventions that are focused on skills development, the bank estimates that the number of people categorised as poor could be reduced from 10.5-million in 2017 to 4.1-million in 2030.

menons@businesslive.co.za

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